Glossary · OPERATIONS

Escrow

A neutral third-party account that holds funds or documents until specified conditions are met.

Escrow is used in two contexts in real estate. First, closing escrow: the title company or escrow officer holds the purchase funds and documents until all closing conditions are met, then simultaneously disburses to all parties and records the deed. Second, impound/reserve escrow: a loan servicer holds monthly deposits for property taxes and insurance, paying them when due. In seller-financed deals, tax and insurance escrow is often handled by the third-party loan servicer. Escrow protects both buyer and seller by ensuring funds are only released when conditions are satisfied and obligations are met.

Related Terms

Note Servicing

Professional management of a loan's payment collection, ledgering, escrow, and year-end tax reportin

Seller Financing

A transaction where the property seller provides the loan directly, eliminating the need for a tradi

Title Insurance

An insurance policy protecting against losses from defects in the property title that existed before

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